Question

Two years ago the Euro sinks to its lowest level against the dollar (see the following new articles):

http://www.theguardian.com/business/2015/jan/05/euro-sinks-nine-year-low-against-dollar

http://www.theguardian.com/business/2015/mar/11/euro-12-year-low-gainst-the-dollar

To stimulate the region’s economy, the European Central Bank was poised to print billions of Euros as part of a full-blown quantitative easing program.

The Quantitative Easing was expected to make long-term interest rate lower and driving down the value of the euro. Analyst argued that it was good news for American tourists (take a look the following articles).

http://www.slate.com/blogs/moneybox/2015/03/11/the_falling_euro_sure_it_s_great_for_europe_but_what_about_the_u_s.html

What is Quantitative Easing Policy? How it affected the value of Euro? Do you think it was good for American Business and Tourists?

Answer 1

Quantitative Easing policy is the decision of the government to buy bonds aggressively. This is mainly done to protect the shrinking economy. The aim is to lower the interest rates in the market and also increase the money supply by printing more currency notes. It is a monetary policy decision taken by the government when they realize that the economy is not functioning properly.

The value of euro increased steadily due to the quantitative easing. The effect of this was seen on the economy which had started recovering and the unemployment rate had also reduced.

The failing economy of Europe was good for American tourists as they could plan their tours at a cheaper rate. But this is not so good for the American business as the products from Europe would become cheaper and then the imports from Europe would increase. This would ultimately affect the business of the local American companies.